More General posts
June 17, 2002
.NET, Substitutes and Complements

Joel Spolsky has another interesting strategy letter available. This has been discussed at some length on Slashdot and I don't want to try and rehash that discussion here.

Joel describes the general principle; Smart companies try to commoditize their product's complements. More interesting to me than the specific examples he gives is the actual idea itself. I think that in programming the best way to learn a language is to try to write programs in it; with these sorts of ideas the best way to understand them is to try and apply them.

What about .NET, is there anything to think about there? Well, imagine that Microsoft wants to move into the Enterprise Computing space, what sort of complementary products does that require? One thing that comes to mind is that you need good integration capabilities, you need to be able to connect the SAP ERP system to the Siebel CRM system. Currently this sort of product is provided by companies like TIBCO and webMethods, and has been a nice little earner for them. webMethods' stock went up 507.5 percent on its first day. OK, that was in 2000 but very impressive even for then.

So, what does Web Services and .NET do to the enterprise integration business? It commoditizes it. With this complementary product reduced to a commodity Microsoft's chances of getting into the Enterprise space improve and the prices they can charge go up. If Microsoft can convince SAP, Siebel and other Enterprise Software vendors to offer SOAP access in their applications; if it can position itself as the Web Services leader, with good support built into the OS it controls and the tools it provides; it's time to sell TIBCO and webMethods stock.

And it looks like this is happening. Microsoft is generating such hype and buzz around Web Services that customers are starting to demand SOAP access even when they have no compelling use for it yet. It's turning up in RFPs already, and this means that SAP, Siebel and PeopleSoft will be adding it to their systems. Perhaps the only bump is that Microsoft is trying to push its own BizTalk standard instead of going with ebXML. If the goal is commodity status the more players behind a single standard the greater the momentum. A couple of competing standards allows a space for TIBCO and webMethods to thrive on converting between the two.

What's after EAI integration? Maybe it's business process management. This is where TIBCO and webMethods are heading now, it's a pretty hot space. Microsoft has some product in this area and it might be where they would go next. The movement into business process management would perhaps be predicted by The Innovator's Dilemma, companies are forced to move upmarket chasing the larger returns as the market below them is eaten up the disruptive replacements. In this view Web Services is a disruptive technology to TIBCO and webMethods, perhaps not as good along the axes they are evaluated on but offering other benefits along other axes; that's a topic for another post though.

Posted by Alex at June 17, 2002 09:04 PM
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